Various Steps Possible to Reduce, Manage Costs in Multifamily Properties
By Caitlin Jones & A. J. Johnson
6 min read
Tax Credit Advisor August, 2006: Developers, owners, and managers can pare energy costs for existing multifamily rental properties and make them “greener” through a number of different steps. These include commissioning an energy audit, embracing energy efficiency as a corporate and resident goal, and taking advantage of various available financial and tax incentives to offset the cost of improvements.
The possible steps that can be taken to improve a multifamily rental property were recently outlined by Shari Solomon, an executive at CONNOR, a Baltimore, Md. consulting firm.
With rising prices for electricity, natural gas, and oil significant in recent years and likely to continue, Solomon said housing professionals need to “manage to the increases.”
For starters, she indicated owners and property managers should make energy efficiency a company goal and reflect it in its asset management practices. This includes updating pertinent policies, procedures, and products. For instance, she said a firm might examine how it handles maintenance issues, how quickly it responds to problems such as with a property’s HVAC system, and how the firm’s maintenance workers deal with their on-site obligations.
Solomon said it’s also important to develop a good understanding of how a property’s residents are using energy, and their energy costs, and to get them to buy into the importance of energy efficiency. For instance, she said numerous property managers hold contests in which they present awards to the residents who have low energy bills or low energy use. “It sets good routines, sets good habits,” she noted.
Energy Audits
Solomon suggested that getting an energy audit can be a smart way for an owner or manager to find out exactly the energy usage and costs for a multifamily property, where energy is being wasted or lost, and what improvements could be made to enhance efficiency and cut energy bills.
She said energy audits differ in scope, cost, and in the details provided to the customer. According to Solomon, they can range from a “Level 1″ audit that reviews energy usage and expenditures, down to “extremely detailed audits.” She said a Level 2 audit, more extensive than Level 1, typically costs $4,000-$7,000 per property.
In general, Solomon said an energy audit determines the usage and costs of energy (e.g. electricity, oil, natural gas) in a building to the client (broken down by costs paid by management, and costs paid by the residents); inventories all energy-consuming products and equipment in the property (e.g., HVAC systems, lighting, appliances) and assesses their condition; and provides a list of potential energy conservation measures that would reduce energy use and cost, along with the estimated payback period for each item. “We quantify how much you are going to invest, and how much you are going to save over time,” Solomon said, adding that energy audits can identify ways the building owner/manager can save money on energy, ways the residents can save, or both.
Solomon said in an energy audit a building can be pressurized to reveal air leak, noting potentially as much as 30 percent of a building’s heating and cooling costs can be lost through the building envelope alone.
Energy Conservation Measures
Examples of areas where Solomon said energy savings can be realized include:
- Air conditioning. Changing to a “higher efficiency” system “can really save you money over time,” she noted.
- Lighting (indoor and outdoor): Changing from incandescent to fluorescent lights, or changing to better fluorescent lighting.
- Making various improvements to the property’s mechanical systems, such as exhaust systems, pool heating, motor controllers, or elevator operations.
- Appliances. Installing more efficient Energy Star-labeled appliances (e.g. refrigerators, dishwashers) in the property.
- Making adjustments to temperature control and building automation systems to reduce use of natural gas and oil. Also, repairing or upgrading systems and insulation on boiler vessels, storage tanks, water heating, and piping, or considering a switch to a solar water heating system.
Water, Utility Measures
Solomon noted savings can also be achieved through water conservation by changing showerheads or toilets to “low flow” devices. This is an “extremely cheap fix” that can save significant dollars “down the line,” she explained.
She also mentioned potential savings relating to utility bills and utility providers.
She said one possibility is to pay for utility bill audit services, which ensure that the property is being charged the appropriate rate charge by the utility provider, and which can identify the most efficient operating schedule for the property. Solomon said using electricity for the property at off-peak hours, when rates are lower, is one possible source of savings. Solomon indicated some utility providers also provide a break for pre-payments for oil or natural gas.
Bulk purchases of electricity or natural gas may also be possible in some states, Solomon said. For instance, she said the Maryland Multifamily Housing Association recently made a bulk purchase of natural gas for its member firms that cut their costs by 30 percent.
“Utility providers do have opportunities out there for you to save money,” Solomon said. “So you need to do your research, talk to your utility companies, your local providers, and see what options they offer.”
Rebates, Tax Breaks, Other Incentives
Solomon noted owners and managers may also be able to leverage their cost savings from the purchase and installation of energy conservation measures, and improve their return on investment, by taking advantage of various financial or tax incentives available from federal, state, and local governments, such as grants, tax credits, or tax deductions. Some utilities even offer rebates to owners and managers of multifamily apartment properties for the purchase and installation of energy efficiency improvement. An example is San Francisco-based Pacific Gas and Electric Company, whose current rebate program began January 1, 2006.
Solomon urged owners to contact their utility providers to find out about such incentives. “A lot of the utility providers, a lot of the local and state governments, have money set aside for energy efficiency programs, and they don’t know how to spend it, they don’t know what to do with it,” she noted.
At the federal level, one possibility is tax deductions available under the Energy Policy Act of 2005 for certain energy conservation improvements in commercial buildings placed in service by the end of 2007.
(For a list of state and utility incentives, go to http://www. facilitiesnet.com/energyresearchcenter/ energyincentives.asp)
